An unlikely story: how did this historic rock become a dynamic and modern financial centre? (Shutterstock)
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Rock steady: the story of Gibraltar’s booming insurance sector

Gibraltar’s insurance sector has seen explosive growth since joining the single market: one in six UK motorists are now covered by a company on the Rock. Yet, as in the UK, it remains a challenge to convince young people that insurance is “as glamorous as being a barrister”, says Chris Johnson, chairman of the Gibraltar Insurance Association

Gibraltar in the late 1990s accommodated no more than a dozen insurance companies. Remarkably, this has now grown to over 50 companies with more than £3.5bn of premiums written here, and nearly £10bn of assets in insurance companies.

What, then, has driven the growth of Gibraltar’s insurance industry over the last 20 years, and what does it look like now?

Gibraltar is an unusual community - a British Overseas Territory located at the southernmost tip of Europe. It can be slightly odd sometimes to arrive here, driving in from Spain, and see British policemen’s helmets and red phone boxes. The place is full of history, having been ceded to the British crown in perpetuity by Spain over 300 years ago. Today it is home to colonies of tailless monkeys that are fiercely protected (it is a popular local myth that if the monkeys leave, Gibraltar will cease to be British). But it also has a less whimsical side – Gibraltar has always been a mini-nation of merchants and traders and it takes its business seriously.

In 1997, Gibraltar acceded to the Single European Market for Insurance, its regulatory body (the Financial Services Commission) having been recognised as a competent regulatory authority within the EU. This meant insurers that had their head office on the Rock would be regulated by the FSC, and could now “passport” (carry out its activities) into other European Economic Area territories, either under the doctrine of “Freedom of Services” or “establishment”.

But what exactly do these terms mean? Well, establishment involves setting up a branch in the country where the insurance company wants to insure risks – Freedom of Services means that the insurer can underwrite risks in the other country on a cross-border basis. Under EU law, the insurer can do this without needing to apply for a licence in that country, provided they follow passporting procedures and complies with the law of the country where they are insuring.

So in the early part of the 21st century, Gibraltar embarked on a series of initiatives to take advantage of its new status and enhance its offering for insurance.

Most notable of these was the passing of the Protected Cell Companies Ordinance in 2001, a piece of legislation that enabled companies to segregate into divisions focused on different types of insurance. A simple way to imagine this would be to think of a flower – with the core company in the middle and a variety of petals (divisions) surrounding it, financially independent from each other (and therefore safeguarded from liability for another division’s risks or losses) yet benefitting from the strengths and securities of the whole.

Over the next few years Gibraltar’s insurance industry grew and grew – today there are some 57 insurance companies fully operative on the Rock, as well as the various service providers that support the industry. There are a variety of insurers in Gibraltar, including captives, Protected Cell Companies, liability insurers, and property insurers. But the biggest success story has been in motor insurance, especially doing business in the UK market. Its 25 motor insurers cover one in six UK motorists, almost double the market share of Lloyd’s of London.

Gibraltar’s biggest challenge has probably been in terms of skill shortages. The community of the Rock numbers no more than 30,000 people, the size of a small market town, and often punches above its weight in terms of the talent it produces in politics and the arts. The legal and accountancy professions are popular choices among teenagers leaving school and going to further studies, and insurance works hard to attract leavers to the industry. Recent studies have shown however that insurance is one of the least popular graduate career choices in the UK and Gibraltar seems to be no different.

When I arrived in Gibraltar in 1987, there was a very small indigenous industry with a tiny international dimension – I was one of only two qualified insurance persons on the Rock and the other was a colleague of mine, also from the UK. Over the years though, we have drawn more young Gibraltarians into the industry. The establishment by the GIA in 2008 of the Gibraltar Insurance Institute both vastly improved educational standards within the industry, and helped bringing young people in. We’re still not quite as glamorous as barristers, but we’re getting there!

The GIA today has an excellent relationship with our regulator, the FSC, and with government. We speak loudly when issues arise, and we like to feel that we are listened to. Our community is one that listens and responds to its industries.

It’s a bit of an unlikely story; a rock steeped in history becoming the base for a dynamic and modern financial centre. But the insurance industry, and other branches of the finance centre in Gibraltar, are living proof of the forward-looking and proactive business attitude that has infused this little bit of Britain at the foot of the Iberian Peninsula.

Chris Johnson ACII is chairman of the Gibraltar Insurance Association (GIA) and director of the Robus Group

Photo: Getty
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Gibraltar and Europe: caught in the slipstream?

The British papers are full of who has the lead in the European in or out campaigns – Guy Clapperton considers the fallout for the smaller territories

Let’s start by acknowledging that there is no clear pattern emerging in the Europe debate, as long as we understand “Europe debate” to mean whether the UK should stay in or leave the European Union. This week alone we’ve seen Boris Johnson “warning Obama off” (as the BBC put it) getting involved in the debated, the same London Mayor and MP having a radio spat with Chuka Umunna involving telling each other to man up and various insults traded as either side accuses the other of scaremongering or making it up as they go along.

Divining who’s going to win is more difficult. The Daily Telegraph reports that “out” has it by a tiny margin but, crucially, the anti-Europe vote is likely to be more motivated so will actually show up on the day, expanding the margin by which it will win. Meanwhile the Times’ daily Red Box email points to Elections Etc. whose research suggests a 58% “remain” vote but with a plus or minus 14% error margin; so somewhere between 44% and 72% will go for staying in the EU. This, readers will note, tells us precisely nothing.

So the outcome, even if there weren’t 100 days in which Presidents and world leaders will offer counsel, claims and counterclaims will be made and the “leave” campaign will eventually decide who the official “leave” group actually is (there are two factions at the moment, doing the best impression of the Monty Python Judean People’s Front and the People’s Front of Judea that they can manage), we wouldn’t want to call a snap referendum even if it were to be called this afternoon.

What’s clear is that the outcome will ripple beyond the British mainland’s shores, and the ramifications of an “out” vote are already being felt on Gibraltar. Anyone doubting this should check today’s Times (subscription required), in which the Gibraltarian Chief Minister Fabian Picardo highlights recent Spanish statements about what would happen in the event of a Brexit.

Spain actually caused a few eyebrows to raise and some other people to panic just a little with its recent statements. Essentially the country’s foreign minister, José Manuel García-Margallo, suggested that there would be conversations on the sovereignty of Gibraltar the “day after” an announcement of a British exit, according to the Daily Mail and other reports. He also said (much, much further down the report) that he didn’t want Britain to leave: “God forbid” is the phrase he uses.

He raised the idea of joint sovereignty once again more recently, reports the Gibraltar Chronicle, this time suggesting that if Britain leaves Europe then Gib could do what it nearly did (he says) in 2002 and start transitioning towards Spain. This is an interesting definition of “nearly” when 98.48% of the electorate actually voted not to do so, but remaining British when this might exclude the Rock from Europe would inevitably raise different issues if not a different final outcome.

Outside Gibraltarian interests the effect could be more severe than that. SNP leader and Scottish First Minister Nicola Sturgeon has made no secret of her wish to make a fresh case for Scottish independence. The once-in-a-generation referendum on this was lost in 2014 but should Britain exit Europe with a majority of Scots clearly demonstrating that they want to stay in, the case becomes stronger (although the collapse of the oil price would blow the original blueprint out of the water).

So we could end up with Scotland as well as Gibraltar wanting to remain in Europe while Britain made its exit. Whether this would be legally possible if both stayed tied to Britain is untested as yet – and with Spain eager to enter talks the day after an exit is agreed but the Gibraltarians implacably opposed to becoming Spanish, the way forward would not be clear.

Guy Clapperton is the freelance journalist who edits the New Statesman’s Gibraltar hub. You can also find him in the Guardian, Computer Business Review and Professional Outsourcing which he edits.